Independent Contractors And Intellectual Property Rights

T. Randolph Catanese, Esq. © 1999. All Rights Reserved.

The first three segments in this series on independent contractor relationships focused on independent contractor versus employee, employee versus agent and confidentiality issues. This last segment will focus on how the entrepreneur and start-up company confirms its ownership of intellectual property developed by the independent contractor for them.

You probably think that there is no need for our Ventura County litigation lawyer to assist you by developing an written agreement because independent contractors realize that their work is "for hire" meaning simply that they get paid by the company to develop intellectual property and in exchange they give up all rights thereto for payment. But problems still arise between independent contractors and start-up companies in the area of intellectual property.

It is not uncommon for a start-up entity to begin working with an independent contractor, usually a computer programmer, without a written agreement. Usually, the relationship starts off very quickly and with the best of intentions. But, there are times where the programmer fails to provide the computer code in a timely fashion or if it is provided it is incomplete or unacceptable. When this occurs, the company usually retains a new programmer to finish the work, and, the new programmer normally wants access to all of the code the old independent contractor programmer prepared. The company does not want to pay the former computer programmer what he or she claims is owed because they feel that the work was not done correctly. When this occurs the programmer normally refuses to turn over the code until they receive what they believe to be fair payment. The issue then becomes who owns the code and can the programmer keep the code even when the engagement is over?

If the independent contractor agreement is carefully written, it should provide that all intellectual property developed by the independent contractor is owned completely by the company or the entrepreneur. That means that when the engagement is over the independent contractor is obligated to turn over any and all intellectual property developed and forego retaining any copies of code or other intellectual property that may have been developed pursuant to their relationship.

The turnover of the intellectual property goes hand-in-hand with the confidentiality agreement. The confidentiality agreement provides that the information is to remain confidential since it is treated as a trade secret of the company. The best situation would be one where the independent contractor agreement provides that the intellectual property developed during the engagement is owned by the company free and clear of any claims by the independent contractor and the independent contractor agrees not to retain any copies of the intellectual property and not utilize the intellectual property developed to benefit himself or other clients even when the engagement is concluded.

In situations where a problem arises with the independent contractor regarding the intellectual property developed, it is important for the entrepreneur/start-up company to take steps quickly to notify the independent contractor that he or she is not permitted to use the intellectual property developed until such time as the dispute between the company and the independent contractor is resolved. Otherwise, the independent contractor may attempt to sell or otherwise benefit from the work which was developed at the company’s expense.  This can be done through the services of a Ventura County litigation lawyer.

In conclusion, the best way for the entrepreneur or start-up company to avoid a problem with an independent contractor related to intellectual property is to have a written agreement, be clear about the scope of work to be performed, be clear about who owns the work when it is developed and be clear about what is to occur in the event of a dispute. Attention to these details will hopefully avoid any disputes with an independent contractor, but if a dispute does arise they should help resolve it quickly and at the least economic cost to the entrepreneur.

Independent contractors are a great resource for entrepreneurs and start-up companies strapped for cash. They provide incredible experience and knowledge without the burden of constant overhead. When managed properly, the independent contractor is a tremendous asset to any entrepreneur or start-up company.

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